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Showing posts with label Canada. Show all posts
Showing posts with label Canada. Show all posts

1942: Canada

The War.

To a much greater extent than in the previous three years, Canadian life in 1942 was dominated by the war. The shelling of Estevan Point on Vancouver Island by a Japanese submarine on June 20 marked the first attack on Canadian soil in the history of Canada as a Dominion. Far more serious, however, was the loss of twenty United Nations merchant ships in the St. Lawrence River and Gulf during the year. There had been no such sinkings in 1940 or 1941. One of the sinkings in the St. Lawrence in October occurred as high up the river as Metia Beach, while the sinking of the Nova Scotia-Newfoundland ferry a few weeks earlier in Cabot Strait cost the lives of 137 persons, including sixteen women and fourteen children.

The catastrophe at Hongkong on Christmas Day, 1941, involving a considerable number of Canadian troops, and the huge Canadian losses suffered in the Dieppe raid also had repercussions in Canada. Resentment over Hongkong was particularly strong when it was revealed in the House of Commons on Jan. 21 that the 212 vehicles of the Canadian expeditionary force never reached the troops at Hongkong but were sidetracked at Manila where they 'remained under the direction of the United States naval authorities there.' A parliamentary inquiry was held into the circumstances under which some 138 men were sent to Hongkong without having the minimum required training. The losses at Dieppe, as announced on Sept. 18 by Defense Minister J. L. Ralston, were 170 dead, 633 wounded, and 2,547 missing out of an attack force of 5,000 Canadian troops who made up five-sixths of the assault forces. Criticism over the heavy losses was minimized by the optimistic reports given by the Canadian soldiers returning to Canada after the raid.

In contrast to the sobering effect of these heavy losses was the enthusiastic response to joint Canadian-American operations against the Japanese in Alaskan waters. Following the Japanese seizure of Kiska and the bombing of Dutch Harbor, it was revealed that Canadian ground, air, and naval forces were cooperating with those of the United States in defense of Alaska. An agreement was later worked out for an exchange of facilities between the United States and Canada for training airmen and parachute troops.

Canadian military forces continued to expand rapidly during the year. On June 17, it was announced that single men and childless widowers up to and including 35 years of age were subject to military training and service. The age limit for compulsory service had previously been 30 years of age. On Oct. 13, Colonel J. L. Ralston, Minister of National Defense, disclosed in London that there were 'well over 500,000' Canadians on active service. He declared that the Canadian army included 335,000 officers and men available for general service. The Royal Canadian Air Force strength was placed at 130,000. The Dominion's overseas army is made up of two army corps consisting of three infantry divisions, two armored divisions, and two army tank divisions. Colonel Ralston asserted that the army had been carried overseas by the Atlantic convoy system without the loss of a single man.

The rigors of war were also felt much more acutely on the home front in 1942 than in the previous years of the war. Rationing was introduced in Canada for the first time in the last week of January when an informal sugar rationing scheme was put into effect. Gasoline rationing started on Apr. 1 with a system in which the average annual ration was 300 to 380 gallons for nonessential cars and unlimited amounts of gasoline for all types of commercial vehicles. Warning was given in November that meat rationing might start in six months. Price control had been in effect since Dec. 1, 1941. Control over business and production roughly paralleled that of the United States. The last automobiles came off the assembly lines early in 1942. The manufacture of electric toasters, broilers, grills, and metal furniture was halted on Mar. 1, and at about the same time the making of double-breasted suits for men was prohibited to save cloth. Building materials and lighting fixtures became scarce and difficult to obtain. Finally, on Nov. 2, the Wartime Prices and Trade Board issued an order freezing all business establishments at their existing status.

Aided by these restrictions, the output of war materials continued to expand rapidly throughout the year with the peak in production expected about the middle of 1943. By the end of 1942 approximately 885,000 were employed in Canada's war industries, of whom about 75,000 men and women were employed in aircraft production alone. New, fast, light mosquito bombers, Curtiss 'Hell Divers,' and heavy, four-engine Lancasters were being made in Canada. It has been revealed that Canadian scientists have developed and Canadian plants are turning out the most powerful explosive of the war. One 10,000-ton merchant vessel is launched every three days from a Canadian shipyard, and the Dominion turned out more than ten types of heavy guns. Bren gun production exceeded 3,000 a month, and tanks were exported to Russia at the rate of three a day.

The extent of Canada's war contribution on the economic front may be seen from Prime Minister Mackenzie King's statement to the House of Commons on Jan. 27 that Canada was planning to supply Britain with munitions of war, raw materials, and foodstuffs to the amount of $1,000,000,000 without charge and without obligation. It was anticipated that this amount of goods would actually be delivered by the early part of 1943. This, of course, does not include equipment for the Canadian army or air force. On Nov. 26, the Bank of Montreal estimated Canada's annual production of war material at $2,500,000,000. It was also estimated that Canada's war plant, practically nonexistent in 1939, was worth more than $4,000,000,000 and was still growing, and that Canada was spending $7,000,000 a day on the war by the end of the year, of which slightly less than half was raised by taxation.

As a result of the war, Canada's foreign trade reached an all-time high in 1942. Imports totalled nearly $2,000,000,000, and exports passed the $2,000,000,000 mark. About 65 per cent of the total was war supplies.

Politics.

The outstanding political issue of the year, as of the previous year, was the drafting of men for overseas service. It will be recalled that in 1940 Prime Minister Mackenzie King had made a pre-election pledge that no Canadian boys would be sent to fight on foreign soil against their will. When it became clear that it would be necessary to send conscripted soldiers to the European battlefront, Mr. King decided to hold a special plebiscite asking for release from his pledge. The decision precipitated a heated controversy. Many strong supporters of conscription, particularly among the Conservatives, opposed holding the plebiscite and declared that they would vote 'no' as a protest against what they regarded as the Prime Minister's half-hearted war policies. The opponents of conscription accused the Prime Minister of bad faith for proposing to break his word, even with the consent of the electorate. Opposition to conscription was, of course, centered largely in Quebec where it was a heritage of the last war. Among French-Canadians, anticonscription feeling was strong in all political parties although a few Liberals urged that the Prime Minister be granted a free hand.

The plebiscite was held on Apr. 27. As was expected, all of the provinces except Quebec voted overwhelmingly to release the Prime Minister from his pledge. In Quebec, however, the vote was 3 to 1 against conscription. The vote was close in Montreal, but in some parts of the province the vote ran 30 to 1 and even 40 to 1 against releasing the Prime Minister. Opposition was also strong in some French-speaking districts bordering Quebec, especially in the Bay of Chaleur district of New Brunswick, but the Maritime Provinces as a whole voted decisively in the Affirmative. The Western Provinces also voted strongly in favor of conscription, so despite Quebec's opposition the Prime Minister triumphed by a vote of better than 3 to 2. This, however, was a somewhat smaller margin than had been hoped for, and the strength of Quebec's opposition was sufficient to cause the government to hesitate several months before introducing an overseas conscription bill in Parliament.

The conflict within the Cabinet over the issue came to a head early in May when the leader of the Quebec Liberals, P. J. A. Cardin, Minister of Public Works and Transportation, resigned rather than agree to conscription. Concern was felt lest the entire French-Canadian delegation in Parliament would break with the Government, thus creating a serious breach in the country that would make the application of conscription inadvisable. By the end of July, however, when the bill authorizing drafting men for overseas service finally came up for a vote in Parliament, Mr. Cardin declared that when the law was enacted Quebec would obey it. This ended the controversy. On July 29, the Canadian Senate passed the bill 42 to 9, and it became law.

With a view to conciliating Quebec, Prime Minister King appointed three French-Canadian leaders as members of the Canadian Cabinet on Oct. 7. Major General L. R. LaFlèche was named as Minister of the National War Services with responsibility for raising men for the armed forces. Ernest Bertrand was named as Minister of Fisheries, and Alphonse Fournier, Liberal member from Hull, was appointed Minister of Public Works. Thomas Vien, member of Parliament from the Outremont district of Montreal, was appointed to fill one of the fifteen vacancies in the Senate. The previous Minister of Fisheries, J. E. Michaud, was shifted to the Ministry of Transport. The changes were well received in Quebec.

On Nov. 4, Prime Minister King announced the appointment of L. Dana Wilgress, Deputy Minister of Trade and Commerce, as Minister to the Soviet Union; Major General Victor W. Odlum was named Minister to China; Justice T. C. Davis of the Saskatchewan Court of Appeals replaced Major General Odlum as High Commissioner in Australia; and Professor Warwick F. Chipman of McGill University was designated Minister to Chile.

Two series of Parliamentary by-elections were held during the year. In the first, held on Feb. 9, a major sensation was caused by the defeat of former Premier Arthur Meighen, Conservative, by Joseph Noseworthy of the Cooperative Commonwealth Federation in the South District of Toronto. Mr. Meighen had recently been called out of retirement to lead the Conservative party. South Toronto was considered so overwhelmingly Conservative that the Liberals did not even bother to run a candidate against Meighen, and the C.C.F. candidate had not been taken very seriously in view of the fact that the C.C.F. had never held a seat from Ontario. The vote revealed, however, tremendous opposition to Meighen, a notorious reactionary — an opposition that apparently pervaded all political parties.

A further warning of growing C.C.F. strength was given the government, however, in the Welland division of Ontario where the new Labor Minister, Humphrey Mitchell, won out with an unexpectedly close victory over a comparatively unknown C.C.F. candidate and an Independent Liberal.

Government supporters won easily, however, in two Quebec districts. In Quebec East, the newly appointed Minister of Justice, Louis St. Laurent, defeated his Canada party opponent, Paul Bouchard. Mr. Bouchard, a former member of Parliament, ran on a straight anticonscription platform. In the St. Mary district of Montreal the Liberal Gaspard Fauteux won over three opponents.

In the second series of by-elections, held on Nov. 30, Maj. Gen. L. R. LaFlèche, the new Minister of National War Services, won easily in Montreal Outremont. In Charlevoix-Saguenay, the Liberal candidate was defeated by an independent. The C.C.F. held Winnipeg North Center.

Civil Liberties.

The problem of preserving essential civil liberties in Canada in wartime has been made difficult by the sweeping nature of the Defense of Canada Regulations. This has resulted in a lack of consistency in the enforcement in different parts of the country and a considerable difference of opinion with regard to what constitutes sedition. Because of the vagueness in the language of law, many men accused of sedition have been released because judges hesitated to make an interpretation that might be overruled in a higher court.

In the past year, however, controversy has revolved chiefly around the status of the Communist Party. Together with thirty-three other organizations, the Communist Party of Canada was declared illegal and its property placed under the control of a custodian under Sections 39 and 39A of the Defense of Canada Regulations. Needless to say this action was taken before the Soviet Union entered the war on the side of the United Nations. Prior to the German attack on the Soviet Union, Canadian Communists had been lukewarm in support of the war, and it was feared that they might even commit acts of sabotage. Since June 1941, however, the Communists and their sympathizers have become ardent supporters of the war, and the continued suppression of the Communist Party has been regarded by many Canadians as a needless insult to Russia. Even ex-Premier Hepburn, avowedly anti-labor, urged that the party be restored to its former legal status. Canada is the only English-speaking country in the world in which the Communist Party has been illegal. In England the Communists maintained a representative in Parliament throughout the entire 1939-1941 period when their party was in disrepute.

The National Council for Democratic Rights urges that the following steps be taken to restore basic civil rights: (1) Release of all interned and imprisoned anti-Fascists; (2) removal of the ban against the Communist Party and all other anti-Fascist organizations; (3) return to such bodies all property that has been confiscated; (4) removal of the ban against anti-Fascist newspapers and periodicals; (5) guarantees be given for the protection of trade union rights; (6) repeal of Section 21 of the Defense of Canada Regulations, together with all other sections that restrict the rights of free speech, free assembly, and freedom of organization. The Civil Liberties Association of Toronto also urged that Regulation 21 be amended.

Acting in response to public criticism, the new Minister of Justice, Mr. St. Laurent, announced early in May the setting up of a parliamentary committee to consider and review the Defense of Canada Regulations. This committee recommended that the ban be lifted on the Communist Party, Jehovah's Witnesses, and several other organizations that were in no way connected with the Axis. With a view to precipitating action, thirteen members of the Communist Party including its Secretary, Tim Buck, surrendered to the Royal Canadian Mounted Police on Sept. 25. They had been sought for internment since the party had been declared illegal in June 1940. Less than a fortnight later, the entire group was released 'conditionally' by Justice Minister St. Laurent. But no action was announced legalizing the Communist Party as recommended by the parliamentary committee. Later, on Nov. 14, Earl Browder, the American Communist leader, was barred from Canada on the ground that the party was still illegal in Canada.

United States-Canadian Relations.

Many steps have been taken during the past year to facilitate cooperation between the United States and the Dominion of Canada. A joint board to purchase and allocate raw materials for war production was set up early in January. The construction of the Alaskan Highway across Canadian territory necessitated the cutting of much red tape. All war materials now move without interruption across the border both ways between Canada and Alaska. American and Canadian fishing boats receive the same treatment when they enter a Pacific Coast port regardless of whether the port is in Canada or the United States. American whalers have been granted permission to use a port in the Queen Charlotte Islands. Joint defense plans in the Northwest have resulted in Canadian sea, land, and air forces participating in the defense of the Aleutians. Plans also have been worked out for an interchange of facilities in the air training program of the two countries.

Six changes have been made in Canadian customs procedure to speed the interchange of war supplies with the United States. They include: (1) broadening the free list to include many items hitherto subject to duty; (2) remission of customs duties on imports from the United States that go into products manufactured in Canada for others of the United Nations; (3) purchases of war materials from the United States by the Department of Munitions and Supply are exempt from duty except when such supplies are on Canadian account; (4) Canadian export permits are not required for the export of Canadian war supplies; (5) customs officials at Canadian ports of entry have been directed by the Minister of National Revenues to permit war supplies to be delivered by the railways to consignees in Canada even before they have passed entry; (6) the United States Government has been given special concessions with respect to imports into Canada both for the building of certain of its establishments in various parts of the Dominion and for its engineering requirements on the Alaska Highway. (See CIVIL ENGINEERING: Highways.)

With a view to promoting still closer relationships between the two countries, Canada was granted a place on the Combined Resources Allocation Board at the end of October. In taking this place, Canada attained full equality with Great Britain and the United States on a top United Nations policy-making body.

As a culmination of growing wartime cooperation between the United States and Canada, it was announced on Dec. 1 that a comprehensive agreement had been signed by the two countries aimed at establishing freer trade both between them and in the world after the war. The two countries agree in principle to reduce tariffs and other trade barriers between them, and to eliminate all forms of discriminatory treatment in international commerce in line with the objectives of the Atlantic Charter. The agreement will be open to participation by all other nations of like mind.

Dominion-Province Cooperation.

Except for the controversy over the draft in which Quebec separatism was very much involved, the Dominion-provincial conflicts of previous years were little in evidence in 1942. The resignation of Premier Hepburn of Ontario on Oct. 21 ended the spectacular personal feud which had raged for years between the Prime Minister of Canada and the Premier of Ontario, a feud that was in no way lessened by the fact that the two men were both members of the Liberal party until Hepburn was expelled in February 1942. Hepburn's successor, Attorney General Gordon Conant, held many of the same political views as Hepburn but had no personal grudge against Prime Minister King.

Agreements were reached in January with the nine provinces on a plan to compensate them for consenting to abandon use of the personal income and corporation taxes for the duration of the war. Five provinces — British Columbia, Alberta, Manitoba, Ontario, and Quebec — accepted a proposal whereby the Dominion reimbursed the provincial treasuries by the amount the province obtained from income taxes in 1940; and four provinces — Saskatchewan, New Brunswick, Nova Scotia, and Prince Edward Island — accepted the alternative option under which the Dominion assumed the cost of net debt services paid by the province in 1940. A study prepared by the Dominion Securities Corporation shows the range of revenues to be supplied by the Dominion ranges from 36.6 per cent in Alberta to 62.2 per cent in New Brunswick. The following are the total amounts payable to each province: Prince Edward Island, $701,943; Nova Scotia, $2,909,430; New Brunswick, $3,650,067; Quebec, $20,704,737; Ontario, $28,961,488; Manitoba, $5,634,740; Saskatchewan, $5,830,471; Alberta, $4,080,218; British Columbia, $12,048,367. The agreements will remain in force until one year after the end of the war when the Dominion agrees to reduce its tax rate so as to permit the provinces to reenter the tax field which they have temporarily vacated.

Finance and Business.

Finance Minister J. E. Ilsley estimated total expenditures for war and nonmilitary purposes for the fiscal year beginning Apr. 1, 1942 at $3,570,000,000, including a $1,000,000,000 gift to Great Britain. By June, however, when he presented his budget, he raised this estimate to $3,900,000,000. This figure compared with expenditures in the 1941-42 fiscal year of $1,894,956,000 plus $1,050,000,000 advanced to Great Britain for the purchase of supplies in Canada. Income for the fiscal year was $1,481,285,000, leaving a deficit of $413,681,000 — not counting the amount advanced to Great Britain.

To meet the sharp increase in expenditures, new taxes were levied in the 1942 budget to raise approximately $377,850,000. The income tax was expected to yield $115,000,000 more than in the previous year. Under the new law, a married man with an income of $2,000 a year is liable for a tax of $431 a year as compared with $175 in the previous year. Of this amount, $231 will be considered as the regular tax, and $200 will be refunded after the war with 2 per cent interest. The excess profits tax was increased from 75 to 100 per cent, and additional taxes were added to the existing levies on tobacco, liquor, soft drinks, furs, transportation, telephones, chewing gum, jewelry, and other luxury goods.

In mid-August the figure for expenditures was raised upward once again. Instead of a total of $3,900,000,000, it was estimated that they might reach $4,600,000,000. This is well over half Canada's national income, which has been estimated unofficially at $7,900,000,000 for 1942-43 as against $5,400,000,000 for 1939-41. Before the war, the Dominion Government's budget was approximately 13 per cent of the national income; by 1940-41 it had risen to 20 per cent, and by 1941-42 to 40 per cent.

Despite sharply increased taxation, the Dominion Government has been forced to meet most of the cost of the war by borrowing. Although Finance Minister Ilsley had repeatedly warned that bank loans are apt to lead to inflation, he was forced early in August to borrow $75,000,000 a week from banks by means of deposit certificates. This type of borrowing, however, was only temporary. The Second Victory Loan for $600,000,000 was floated successfully in February, yielding a total of $997,503,300. In October the Dominion launched a Third Victory Loan designed to raise $750,000,000. It was subscribed to by more than 1,200,000 individual subscribers out of Canada's total population of 11,500,000, and the $750,000,000 goal was exceeded by more than $130,000,000.

In his annual report to the Minister of Finance filed early in 1942, G. F. Towers, the Governor of the Bank of Canada, declared that $259,000,000 par value of Canada's external debt had been retired during 1941 as compared with $187,000,000 in 1940. This brought the total retirement in the Canadian debt payable abroad to $1,048,000,000 (Canadian dollars) in the six-year period from 1936 to 1941; $203,000,000 of the 1941 retirements represented obligations of the Dominion and the Canadian National Railroad; $34,000,000 consisted of obligations of the provinces; and $22,000,000 obligations of private corporations. New bond issues of the Dominion Government and the Canadian National Railroad — which are guaranteed by the government — amounted to $732,000,000 during 1941, excluding Treasury bills.

The net profits of the Bank of Canada from operations were $5,813,386 after providing for contingencies and reserves. After payment of dividends amounting to $225,000, the net was $5,588,386 as compared with $3,819,460 in 1940. The increase in earnings was attributed mainly to the fact that the bank's investments increased by an average of $158,000,000 during the year.

Business activity, except for some nonessential industries, was at a record high during 1942. The index of the physical volume of business for the first six months of the year averaged 136.3 as compared with 129.3 in the corresponding period of 1941. The output of the mining industries dropped 2.5 per cent to 123.3, but manufacturing production advanced from 139.2 to 151.6, a gain of nearly 9 per cent. Railroad carloadings rose from 1,495,000 in the first half of 1941 to 1,635,000 in the first six months of 1942. The gross revenue of the Canadian National Railways rose from $120,700,000 to $149,000,000, while the gross revenue of the Canadian Pacific increased from $100,300,000 to $121,000,000, a rise of 20.6 per cent.

Although the Canadian Government had instituted a rigorous system of price and wage control at the close of 1941, the cost of living continued to rise slowly during the year. The Dominion Bureau of Statistics reported in August that its adjusted cost of living index stood at 117.0 on July 1, 1942 as compared with 114.6 on Oct. 1, 1941. It was estimated that 90 per cent of the increase was in food prices. Beginning on Aug. 15, Canadian wage earners received a 2.4 bonus on their wages to compensate them for the higher cost of living. The order did not apply to agricultural workers, domestic servants, or government or municipal employees. Civil service employees received a special bonus of $18.42 a month — an increase from the $11.91 bonus previously paid. This bonus is not payable to employees — except manual workers — earning over $2,100 a year.

Agriculture.

The year was an exceptionally good one for Canadian agriculture. The wheat, oats, and barley crops were heavy and of good grade everywhere in Western Canada. Thirty to thirty-five bushels of wheat to the acre was reported from most districts with an occasional yield running as high as fifty bushels. Harvesting was slow, however, due to the shortage of agricultural labor, but part of this lack was remedied by the recruiting of special workers in Ontario for work in the fields of Alberta, Saskatchewan, and Manitoba.

With a view to discouraging excessive wheat production at the expense of the coarser grains, the Dominion Government continued to restrict its purchases. Provision was made, however, for the purchase of 280,000,000 bushels, an increase of 50,000,000 bushels over the total purchased in the 1941-42 crop year. The price for government purchase of wheat was set at 90 cents a bushel at Fort William, Ontario, an increase of 20 cents a bushel over the 1941 price. Producers of oats, barley, and flax were paid a bonus of $2 an acre in addition to a sharply increased price for their product. A minimum price of 60 cents a bushel at Fort William was set for barley, and 45 cents a bushel was set as the minimum price for oats. The fixed price for flaxseed was $2.25 a bushel, an increase of 61 cents a bushel from the 1941 figure. A special effort was made to encourage wide planting of flax to offset the Allied losses in vegetable oils which are usually obtained from the Far East. The results were reasonably satisfactory. It is estimated that a total of 1,517,000 acres were devoted to flax in the three prairie provinces of Manitoba, Saskatchewan, and Alberta as against 982,000 acres in 1941.

J. C. Gardiner, Agricultural Minister in the Dominion Government, on Sept. 18 announced a program designed to make use of the vast stores of grain that had been accumulated in past years and to increase Canada's output of animal products. Under this program a new agreement was signed with Great Britain providing for a sharp increase in bacon exports to the United Kingdom. Steps were taken to restore a normal volume of pork sales on the Canadian market without interference with British requirements. When this has been achieved, it is believed that the provision of an adequate amount of pork will release beef for the United States market and thus permit the United States to divert some of its beef for shipment to Britain. Steps are also being undertaken to encourage the feeding of beef cattle until they are at least three years old and to bring about an increase in the number of animals turned into beef. It is believed that the present supplies of grain are sufficient to permit planning for a two-year program.

The provincial government of Ontario has taken steps to encourage an expansion in dairy production. A bonus of two cents a pound is paid for cheddar cheese. This cheese subsidy goes back to the farmers through the cheese factories. This bonus costs the Ontario government approximately $2,200,000 a year.

Labor Relations.

Minor strikes and labor disputes occurred in various parts of Canada during the year, but there were few major work stoppages. Among the more serious disputes was a strike in the steel industry in Nova Scotia, a ship strike at Midland and Kingston, Ontario, and a lockout at Kitchener, Ontario. . .[ Two pages of this article are missing from the original book] . . .

Canning. (continued from missing pages)

During 1942 the canning industry operated under a constantly increasing number of regulations, such as those relating to conservation of steel and tin for cans, rubber for closures on glass containers, and steel and other materials required for equipment and machinery; rationing of sugar and other materials; control of prices to be paid for canning crops and to be charged for finished products; reservation of goods for government use; distribution of products to the civilian markets; control of the purchase and use of trucks, tires, and gasoline. In addition, the industry was confronted with a difficult labor supply problem arising from the draft and the migration of labor to employment in airplane and munitions factories, shipyards, and other war industries.

The fact that the regulations were developed during the course of the year, and were subject to numerous amendments and revisions, made their impact on the industry more difficult to meet. On the other hand, government procurement methods were organized in such a way as to facilitate and expedite the purchase of supplies for the armed forces.

As the year drew to a close, the need by processors of seasonal crops for advance information and advance planning for their 1943 operations was recognized by the calling of a conference of food processors, including canners, dehydrators, frozen food packers, and preservers. At this December conference representatives of the various government agencies presented information on food production requirements and regulations for the coming year. Just before this conference, food production and distribution was placed under the direction of the Secretary of Agriculture, and manpower control was centralized in the War Manpower Commission.

Two new types of metal containers for canned foods came into use during the year and will be used more extensively in 1943. Both were designed to save tin. One is a can made of tin plate, the tin on which is deposited by electrolysis instead of by immersion of the plate in a bath of molten tin. The electrolytic method requires less than half the amount of tin used in making the ordinary 'hot-dipped' tin plate. The other is a can made of chemically treated sheet steel to which an enamel coating is applied. These two types of cans will be used for products for which they are adapted.

Under the auspices of the National Canners Association and with the collaboration of can-manufacturing industries, a program of nutrition research on canned foods was undertaken in 1942 and will be expanded in 1943. The work is being carried on through financial grants to universities. The first part of the program, which includes the assay of about twenty-five canned products for vitamin and important mineral content, involved the study of about 30,000 samples of these foods taken from all parts of the country.

1941: Canada

The mobilization of the Dominion's resources for an all-out war effort continued to dominate all other aspects of Canadian life during 1941. The need for such effort was intensified when, on Dec. 7, Prime Minister King announced that Canada was at war with Japan. Twenty-four hours earlier war had been declared on Finland, Hungary, and Rumania. By the end of the year it was estimated that Canada was spending nearly half of its $6,000,000,000 national income on the war. This was approximately twice the proportion of the national income that the United States was devoting to defense and lend-lease needs. Direct war expenditures in the Dominion were approximately $1,500,000,000 and assistance for England amounted to about $1,200,000,000. Shipments to Britain consisted largely of munitions, foodstuffs, and lumber. No repayment is expected for this assistance.

Political and Military.

In the political field the war has thus far brought no serious challenge to the government of Prime Minister W. L. Mackenzie King. Although the Canadian public was required to make great sacrifices, these sacrifices do not appear to have caused any marked political discontent. The issue of conscription is generally regarded as the only one which might conceivably upset Mr. King's government. It will be recalled that this issue was the cause of a bitter dispute in the first World War when the attempt to apply conscription in the French areas of Canada led to riots and attempts at wholesale evasion. With these bitter memories in mind, both of the major political parties went on record at the beginning of this war as opposing conscription as a means of raising a force for overseas duty. Although there is conscription for the home forces, the Government relied solely on the recruiting of volunteers for overseas service.

Despite this handicap, Canada mobilized six divisions for its active army which is trained for overseas service. This is one more division than the Canadian Corps had in France in the first World War. Although numerically the present-day divisions are somewhat smaller than their predecessors, the mechanical striking power is much greater. Five divisions had been sent to England by the close of 1941, together with certain additional units. Some Canadians are known to have been sent to northern Russia and others have been reported in action in Libya. The first Canadian force ever to be sent to the Far East was declared by Prime Minister King on Nov. 15 to have arrived safely at Hongkong. It was reported early in November that these overseas contingents totaled 110,000. The total number of Canadians under arms at the close of the year, including home forces, numbered over 400,000. Of these, 90,000 were in the air force, and 230,000 were in the active army, eligible for service abroad.

This would seem to represent a major effort for a country with a population of barely 11,000,000. But a considerable section of the Canadian public believes that far more could be done if the Government worked out a plan for total war. They feel that the Government should make up its mind as to how many Canadians should serve in the armed forces and how many remain in civilian life. Although the pressure for conscription has not taken partisan form, it is particularly strong among Conservatives. At one of the opening sessions of the Canadian Parliament in November, Prime Minister King made his position clear when he declared:

'Without any consultation of the people on that subject I do not intend to take the responsibility of supporting any policy of conscription for overseas service.'

At the same time he outlined plans for the extension of the already approved principle of compulsory service within Canada.

Economic Changes.

Two years of intensive war effort have virtually transformed Canadian economy. The changes are of particular interest to residents of the United States because they tended to anticipate by about a year similar changes south of the border.

At the outbreak of the war in September 1939, not a Canadian worker in a hundred was engaged in the production of war materials or enrolled in the armed forces. Less than one per cent of the Dominion's national income was being utilized for national defense. By the end of 1941 one worker out of every four was directly engaged in the war effort and another was indirectly contributing through aid for England. This meant a drastic change in the occupations of a large part of the population. Plants producing for civilian demand had to surrender a considerable portion of their skilled labor to the defense industries; there was a huge drain in labor from agricultural regions to supply unskilled workers for defense plants and to meet the needs of the armed forces.

The task of organizing the country to meet the unprecedented economic demands of the war fell chiefly on the Department of Munitions and Supply headed by C. D. Howe. The functions of the Department of Munitions and Supply are two-fold. The first is that of purchasing or procurement. With certain minor exceptions, it has exclusive authority to make the purchases required for the defense effort. It does not, however, decide what is to be purchased. It buys only what is requested either by the various Dominion defense agencies or the British. Its second function is to organize, mobilize, and conserve the resources of Canada for the war effort.

The Department of Munitions and Supply was established in April 1940, to take over the duties of the War Supply Board. The Department built up a number of semi-autonomous branches. These include divisions to handle aircraft production, defense projects, arsenals, naval construction, munitions production, purchasing, priorities and others. In addition, the Department created two other forms of administrative agency: the Controllers and the Government Corporations. These are even more autonomous. The Controllers are entrusted with the duty of supervising certain basic war materials and services such as steel, metals, timber, oil and machine tools. Nine Government corporations were created. They have business men as executives but the Government owns the capital and appoints the directors. Two of them were set up to produce new types of war product — small arms and optical instruments. Another is responsible for certain construction work. Three others were entrusted with building up stocks of imported commodities. And two of the remaining ones have administrative responsibility in connection with the production of explosives and training planes.

Some idea of the extensive nature of the work of the Department of Munitions and Supply may be gained from the fact that by Sept. 30 1941, contracts were placed totaling $2,600,000.000. Capital assistance totaling some $550,000,000 was furnished to Canadian industry for new factories, machines and equipment to facilitate defense production. The Department keeps in close contact with the British Purchasing Commission and the British Supply Council in North America, and maintains representatives in London to keep in touch with the various British ministries.

As a considerable amount of material, particularly of machine tools and aircraft engines, had to be purchased in the United States, close cooperation was established with the Office of Production Management and other defense agencies in the United States. This was especially true of the Priorities Branch which had to work very closely with the authorities handling priorities in this country.

While the Department of Munitions and Supply occupies the key position in Canada's economic reorganization to meet the war crisis, it is by no means the only agency concerned with the war effort. The Wartime Prices and Trade Board was established early in the war, but became increasingly active in recent months. Its job corresponds closely with that of the Office of Price Administration and Civilian Supply in the United States. Its responsibility is to see that prices do not rise to an unjustifiable extent. During the first year its activities were chiefly in connection with rents. A serious shortage of houses existed in many of the defense centers, and the Board sought to combat this situation by 'freezing' rents at the level of Jan. 2, 1940, except in special cases. But it has not found a way of allotting the existing housing facilities among those in need of it.

The powers of this board were considerably expanded at the end of the year when a ceiling was imposed on all prices by a Government order-in-council. Full responsibility for enforcement of the decree was placed on the Board. Beginning Dec. 1, the maximum price at which a person or a firm could sell or supply goods or services was fixed at the highest price at which they supplied goods or services 'of the same kind and quality' during the period from Sept. 15 to Oct. 11, both days included. Quantity discounts and other conditions of sale resulting in a lower net price must be continued. Fines up to a maximum of $5,000 and two years imprisonment, or both, were specified as the penalty for violation of the order. Wages were also stabilized under the new price control arrangement by extending the cost of living bonus principle previously applied to munitions industries to all industries on a mandatory basis. This does not 'freeze' wages in the same manner as prices, but permits adjustment upward only to the extent that the cost of living has risen. Since the outbreak of the war, the cost of living has risen approximately 14 per cent.

The reasons why a general ceiling was considered preferable to the selective control practiced in the United States were outlined to Parliament by the Minister of Finance, J. L. Isley, as follows: (1) it could be more quickly applied; (2) general price control is less discriminatory; (3) appearances to the contrary, general price control involves fewer and less difficult administrative problems; (4) the selective control plan would require thorough investigation of individual industries; (5) the general control method is the only kind of price control which really makes it possible to justify the stabilization of wages; (6) as the fundamental reason, the piecemeal method of selective control would not prevent the inflationary spiral from developing.

In view of the enormous increase of work falling on the Wartime Prices and Trade Board as a result of the price ceiling, Finance Minister Isley appointed Donald Gordon, Deputy Governor of the Bank of Canada, as associate chairman of the Board to work with the acting chairman, Hector B. McKinnon.

Among other wartime agencies set up to meet special needs are the Foreign Exchange Control Board, designed to prevent a speculative flight of capital from Canada, and the National Labor Supply Council which has as its job the task of assuring an adequate supply of skilled labor for the war industries.

Finances.

The budget estimates for the year extending from April 1, 1941, to March 31, 1942, called for direct war expenditures of from $1,300,000,000 to $1,450,000,000, expenditures for non-war purposes of $468,000,000 and a contribution of from $800,000,000 to $900,000,000 to finance Britain's Canadian dollar deficit. This compared with actual expenditures for the 1940-1941 fiscal year of $792,000,000 for the war effort, $475,000,000 for non-war purposes, and $246,000,000 for financing Britain's dollar deficit. It was estimated that $1,400,000,000 would be raised by taxation and that borrowings would total $1,250,000,000 for 1941-1942 as compared with revenues of $872,000,000 and borrowings of $641,000,000 in 1940-1941. To meet this tremendous increase in the budget, taxes were substantially increased. The defense tax was increased from 3 to 7 per cent for bachelors and from 2 to 5 per cent for married men. Income tax rates were increased to a point where they are between two-thirds to three-fourths of the British tax rates. A married man with an income of $2,000 is now required to pay $175 in income and defense taxes as against $75 in the previous year. A married man with an income of $5,000 pays approximately $1,000 in taxes.

The new graduated rates start at 15 per cent for the first $1,000 of net taxable income in place of the 6 or 8 per cent in 1940. They rise to 20 per cent on the next $1,000; 25 per cent of the third $1,000; and upward to a maximum of 80 per cent on taxable income between $300,000 and $500,000 and finally to 85 per cent on all income of more than $500,000. Basic exemptions remain at $750 for single persons and $1,500 for married men. The exemption for the defense tax was increased from $600 to $660 a year. Taxes on corporate incomes were also raised. There is a 75 per cent war tax on excess profits, and a further provisions which requires a company to pay at least 40 per cent of its net income to the Government whether it makes excess profits or not. In addition, special excise taxes have been imposed on a long list of articles including: automobiles, household appliances, travel fares, moving pictures, and cosmetics.

In his report to Parliament on Nov. 12, J. L. Isley, the Finance Minister, predicted that the 1942-1943 budget would be materially higher, probably surpassing $3,000,000,000. He declared that the tax revenue for the 1941-1942 fiscal year would exceed the budget estimate of $1,400,000,000 and possibly reach a total of $1,500,000,000. He announced that the $600,000,000 loan of the previous June had been oversubscribed to the extent of $236,000,000 and that the sale of war savings certificates was expected to yield $120,000,000 for the year.

The Dominion Bureau of Statistics estimated the national income of Canada for the first eight months of 1941 at $3,446,000,000 as compared with $3,118,000,000 in the same period of 1940. The national income for the whole of 1940 was officially estimated to be $4,784,000,000 as compared with $4,409,000,000 in 1939. Official predictions are that the 1941 national income may exceed $6,000,000,000. A considerable part of the rise is, of course, attributable to increased prices, but it also reflects increased production of war materials.

Labor Relations.

The past year was marked by comparative stability in labor relations. Strikes were infrequent, except in the Maritime Provinces, and the situation was generally more satisfactory at the close of the year than at the beginning.

Credit for the improvement in the labor situation is given, in part, to the practice of stabilizing wages in accordance with the cost of living which has been in effect in the war industries for many months. It is hoped that the extension of this principle to the non-essential industries will also have good effect. Observers also believe that establishment of unemployment insurance on July 1 has contributed to better feeling among workers and should substantially reduce the problems of post-war adjustment. Approximately 2,000,000 workers are covered by this insurance. Payments into the fund are about $4,000,000 monthly.

Among the steps taken to prevent industrial sabotage was an order-in-council issued early in August authorizing the use of troops to keep war industries in operation. This has not been used, however, to break strikes. Another order-in-council, issued in September, outlawed strikes called by minorities. Previously workers had been forbidden to strike until a Board of Conciliation had investigated their grievance. After the Board of Conciliation has issued its findings, the workers may not strike until three conditions have been fulfilled: (1) notice of the intended strike must be given to the Minister of Labor; (2) a general vote must be taken under the supervision of the Department of Labor and subject to the regulations issued by the Minister; and (3) it must be established that a majority of the employees concerned have voted to strike. Penalties of $500, or twelve months imprisonment, or both, are applicable against persons striking or inciting others to strike until these conditions have been fulfilled.

Previously, an order-in-council prohibited Conciliation Boards from recommending wage rates higher than those of December 1940, or in 1926-1929, whichever was the higher. They were permitted, however, to recommend bonuses which would protect workers against increases in the cost of living. Peacetime legislation limiting hours of work was suspended for certain of the war industries for the duration of the conflict.

These and the other limitations previously imposed on labor have, in general, been accepted by organized labor as a wartime necessity. The labor organizations however, urged the passage of new legislation to protect labor against having to bear the entire brunt of the war. Speaking before the 57th annual convention of the Trades and Labor Congress, held in Calgary at the end of September, Tom Moore, president of the organization, pointed out that there was no strike in any industry where collective agreements had been reached and warned employers that 'cooperation is not a one-way street.' The convention went on record as favoring Dominion legislation similar to the Wagner Labor Relations Act in the United States, to protect the wage earners in their right to join labor unions and to make collective bargaining compulsory. It asked both Dominion and provincial governments to make it compulsory that the employer recognize and deal with a trade union if one is organized by his employees. It also asked the Dominion Government to restrain the Department of Munitions and Supply from interfering in labor disputes and to abolish the Office of Labor Relations in that Department. Other resolutions adopted included those urging 'equal pay for equal work' in all war industries; holidays with pay for all workers; a maximum 48-hour week for all restaurant employees; and a six-hour day and a maximum five-day week as a post-war measure.

Civil Liberties.

Although the stringent Defense of Canada Regulations were liberalized to some extent during the year, there was still widespread criticism of the Government's interference with civil liberties under these regulations. On the recommendation of a Special Investigating Committee of the House of Commons, a series of amendments were adopted to the Defense of Canada Regulations during the summer. As the regulations were first drafted, they provided virtually no appeal to arrests and detentions ordered by the Minister of Justice and the powers invested in the Secretary of State. The amendments created a number of advisory committees to whom an internee may appeal for review of his case. While the Minister does not have to take the advice of the committees, a check on his powers is provided through the reports he must make to the House of Commons on the reasons why he ignored the committees' suggestions. Changes were also made in the regulations regarding the forfeiture of articles seized under the Defense of Canada Regulations. Internees were also given the privilege of receiving visitors provided the authorities do not hold this to be 'against the public interest.'

The restrictions that have provoked the greatest dissatisfaction within Canada were those interfering with the press. Freedom of the press as it was formerly understood no longer exists in Canada. Eleven publications have been suppressed since the outbreak of the war. Seven of these were in Ontario, three in Quebec, and one in Manitoba. Of the total, three were French-Canadian, two Nazi, one Communist, and most of the remainder foreign language publications. Also a number of American publications, including some of the best known, were temporarily or permanently banned from Canada. These restrictions contrast with the relatively liberal attitude shown in Great Britain toward publications alleged to be subversive of the war effort. The greater severity of Canada's actions are usually justified by officials on the ground that Canada's heterogeneous population makes subversive activity more dangerous than similar activities in England. This is denied by critics of the Government position who insist that the danger of subversive activity is slight in a country like Canada many thousand miles removed from the war zone. It is probably fair to say that the restrictions are more of a reflection of the lethargy of Canadian progressivism than of the danger of sabotage and anti-war activity.

Somewhat less controversial were the restrictions placed on liberty of assembly although it was under these regulations that the Communist Party of Canada remained banned despite the fact that Russia was a war ally. In addition to the Communists, twenty-seven other organizations and societies were suppressed. These included more than a half a dozen Communist Front organizations, three Nazi-Bundist groups, two Fascist and Fascist-sponsored societies, Jehovah's Witnesses and variety of Bible student associations, and certain Polish, Croatian, and miscellaneous bodies. It is not only illegal to belong to these organizations, but speak in their behalf, or to distribute their literature.

Although many of the hundreds of arrests that were made under the Defense of Canada Regulations doubtless were unjustified, the enforcement of the law was not as unenlightened as many people feared when the law was passed. Proponents of civil liberties readily admit that the fault lies chiefly with the loose, sweeping language of the regulations rather than with the enforcement officers. The 1941 amendments, although they provided some means of redress, have not struck at the fundamental problem of placing too much power in the hands of the administrative authorities.

It should be pointed out that the infringement of civil liberties under the Defense of Canada Regulations in no way destroyed, or materially hampered the essential functioning of democracy in the Dominion. Elections are still held periodically, and the recent successes of the Cooperative Commonwealth Federation attest to the fact that they are still free. The debates in Commons are marked by penetrating and creative thinking and the utmost freedom. There is no failure to criticize the Ministers for mistakes or negligence. And although a few papers have been suppressed, there remain several distinguished opposition papers which serve to maintain a high degree of genuine democracy within Canada.

United States-Canadian Relations.

The coordination of defense activities between the United States and Canada, started in 1940 with the establishment of a Permanent Joint Board on Defense, was extended on Nov. 2, 1941, by the establishment of a Joint Defense Production Committee. Announcement of the creation of this agency came after a two-day conference between Prime Minister Mackenzie King of Canada and President Franklin D. Roosevelt of the United States at the President's home in Hyde Park, N. Y. This was the fourth intergovernmental agency to be formed affecting the joint defense of the two countries. The others, in addition to the Permanent Joint Board on Defense and Joint Defense Production Committee, are the Materials Coordination Committee and the Joint Economic Committee.

The Materials Coordination Committee was set up on May 1 as a result of an informal agreement between the heads of the Canadian Department of Munitions and Supply and the Office of Production Management of the United States. Its membership at the end of the year consisted of W. L. Batt and Philip Reed, Director and Deputy Director of Materials of the Office of Production Management, and G. C. Bateman, the Canadian Metal Controller, and H. J. Symington, the Power Controller, together with one American and one Canadian secretary. This committee is concerned primarily with the coordination of the raw material resources of the two countries.

The Joint Economic Committees were established on June 17, 'to study and report to their respective governments on the possibilities of (1) effecting a more economic, more efficient and more coordinated utilization of the combined resources of the two countries in the production of defense requirements (to the extent that this is not now done) and (2) reducing the probable post-war economic dislocation consequent upon the changes which the economy of each country is presently undergoing.' The Canadian representatives on the Committees consisted of G. C. Bateman, W. A. Mackintosh, of the Department of Finance, J. G. Bouchard, of the Department of Agriculture, and Alex Skelton, of the research division of the Bank of Canada.

Besides these formal committees, many other means of cooperation between the two countries have been developed. Since the outbreak of the war, the stall of the Canadian Legation in Washington has been expanded until it now includes fifteen officials with diplomatic standing. Early in 1941 the office of financial attaché was established to deal with the complicated foreign exchange problems. Representation of the United States at Ottawa has also been greatly expanded since the war although not to as great an extent as Canadian representation in Washington.

Another link in United States-Canada cooperation was forged in the spring when a formal agreement for the construction of the St. Lawrence Seaway was signed. But the agreement had not yet been implemented by Congressional appropriations by the end of the year. Although majority opinion in both countries continued to favor the agreement, there was opposition to it in Canada as well as in the United States. The Canadian opposition came principally from the French Canadian groups under ex-Premier Duplessis of Quebec who disapproved of greater cooperation with the United States on political grounds.

Ratifications of the Canadian-American Permanent International Commission for the conciliation of disputes, a replica of the Bryan conciliation commissions, were exchanged on Aug. 13, 1941. Joint commissions were also set up during the year for the consideration of certain aspects of St. Lawrence River power and navigation development.

It is believed that Prime Minister King's conference with President Roosevelt early in November dealt in part with financial relief for Canada although no specific agreement was announced. It is estimated that Canada's adverse balance of trade with the United States since the beginning of the war, including invisible items but deducting Canadian purchases for Great Britain, amounted to approximately $470,000,000 by Nov. 1, 1941. It is estimated that Canadian purchases in the 1941-1942 fiscal year will amount to $953,000,000 of which $428,000,000 will represent purchases for war purposes. Under the Hyde Park agreement of April the United States agreed to buy $200,000,000 to $300,000,000 of Canadian raw materials. But it is obvious that the trade deficit which remains will have to be met with credit of some sort. Whether this will take the form of lend-lease aid or advances by the Reconstruction Finance Corporation against the $1,250,000,000 worth of American securities held by Canadian nationals had not been announced at the end of the year.

General Political Developments.

In many respects 1941 was the quietest year in the political sphere for more than a decade. Provincial elections were held only in Nova Scotia and British Columbia. In the former there was practically no change in the relative standing of the parties, the Liberals retaining the control that they had held for the past eight years. In British Columbia, the Liberals again won the largest number of seats of any party although surprising gains were achieved by both the Conservatives and the Cooperative Commonwealth Federation and the Liberals failed to win a majority of the total number of seats in the legislature.

New leadership was given to the national Conservative Party when Senator Arthur Meighen accepted the post of leader of the party on Nov. 12, following election at a conference of party leaders. He first rejected the post when it appeared that there was considerable opposition to his selection, but after the vote had been changed to make the election unanimous he was persuaded to accept. Senator Meighen has twice been Prime Minister of Canada for brief periods. He was defeated in three elections — 1921, 1925, and 1926 — twice as leader of the Government. He represents the extreme right in Canadian polities, and has long been regarded as a voice of orthodox finance. He is strongly in favor of extending conscription to cover service in the overseas forces. When appointed to the Canadian Senate, it was presumed that he would retire from active political life. But he has returned more active than for many years. The new leader replaces R. B. Hanson who was forced to retire because of ill health. His selection dealt a death blow to the effort of younger Conservative leaders to make the party an instrument of reform, and thus left the party lines blurred with no recognizable right, and no left except the Cooperative Commonwealth Federation which has not yet developed into a truly national party.

Mr. St. Laurent was chosen Minister of Justice to replace Ernest Lapoint who died recently. See also Articles on UNITED STATES; WORLD WAR II.

1940: Canada, Dominion Of

The year 1940 in the Dominion of Canada was marked by a striking growth in national unity, and an equally impressive development in the nation's industries as the country's contribution to British war effort. This strengthening of its political and economic structure occurred in the face of national parliamentary elections, the death of a highly revered Governor-General, the introduction of conscription, and a precedent-smashing readjustment in its relationship to the United States.

Political Developments.

The parliamentary elections, held on March 26, naturally overshadowed all other events in the field of polities. The elections were called as a direct result of a vote of 'no confidence' in the Government's war effort which was pushed through the Ontario legislature. But they came close to the end of the Government's five-year term in office as provided by the constitution. The election had not been held earlier because of uncertainties growing out of the Government's conflict with the provincial governments of Ontario, Quebec, and Alberta. But last year's election in Quebec, bringing the Liberals back to power in that province, and Premier Aberhard's loyal support of the Government's war effort, left Ontario's dissident Liberal Premier Mitchell Hepburn as the Government's only provincial opposition. Premier Hepburn, like Dr. R. J. Manion, leader of the opposition Conservative Party, based his attack on the Mackenzie King Government on the ground that it had lagged in the prosecution of the war. Both charged that there had been widespread political inefficiency and that many war contracts had been let on the basis of political patronage. Dr. Manion, a veteran of the last war, promised that if elected he would form a national government, drawing upon the best brains of all parties for his Cabinet.

In view of Dr. Manion's personal popularity and the division in Liberal ranks, it was generally assumed that the Conservatives would make substantial gains. Although no one seems to have expected a Government defeat, another Liberal sweep such as occurred in 1935 seemed out of the question. Liberal spokesmen predicted a loss of from ten to thirty seats which would still leave the Government a comfortable majority. To everyone's surprise, the Mackenzie King Government not only repeated its sweep of four years earlier, but actually improved on it to the extent of some fourteen seats. Final returns, including the soldier vote, gave the Liberals 183 seats as against 169 in the old Parliament. The Conservatives gained two seats, increasing their representation from 38 to 40, and the Cooperative Commonwealth Federation obtained 8 seats as against 7 in the previous Parliament. The minor parties, particularly the New Democracy (Social Credit) Party, were heavy losers. The New Democracy party obtained only 9 seats as against 15, while the independents and other minor parties got but 3 seats as against 12 in the previous House.

Contrary to expectations, the Conservatives made no gains in Ontario, Mitchell Hepburn's province, where a Liberal loss of at least 20 seats had been anticipated. Although the Conservatives did much better in this province than elsewhere in Canada, they won but 25 of the province's 82 seats, the same number they had previously held. The Liberals scored nearly a complete sweep in Quebec where they won 61 seats, and candidates favorable to them won the remaining three. This despite the fact that six months previously the province had been strongly in the hands of an opposition party.

Prime Minister J. L. Mackenzie King and every member of his Cabinet was reelected while Dr. Robert Manion, head of the Conservative Party, was defeated in his home city of Fort William, Ontario. A number of other prominent Conservatives, including the deputy leader, M. H. Macpherson, were also defeated, leaving the party in an extraordinarily weak position in Parliament. The leader of the New Democracy party, W. D. Herridge, also lost.

On July 8, the Cabinet was enlarged and reorganized to strengthen Canada's participation in the war effort. The reorganization was forced, in part, at least, by the death of Norman M. Rogers, the Minister of National Defense, in an airplane accident near Toronto on June 10. In the reorganization, Mr. Rogers's post was split into three parts, carrying responsibility separately for the army, navy, and air force. The following are the new ministries, as announced on July 8:

National Defense (Military) — Colonel J. L. Ralston

National Defense (Navy) — Angus MacDonald, Premier of Nova Scotia

National Defense (Air) — C. G. Power

Finance — J. L. Ilsley, previously Minister of National Revenue

National Revenue — Colonel C. W. C. Gibson

Transport and Public Works — P. J. A. Cardin

Postmaster General — W. P. Mulock

Prime Minister Mackenzie King invited R. B. Hanson and Grote Stirling, leaders of the Opposition, to sit with the War Committee of the Cabinet as associate members while retaining the right to criticize the Government in Parliament. The proposal was rejected, however, by the Opposition, it being charged that the King Government was seeking to retain the benefits of a partisan government while offering the fiction of representation to its opponents.

Lord Tweedsmuir, Governor-General of Canada since the fall of 1935, died in Montreal on Feb. 11, 1940, just as the country was entering upon the election campaign. Lord Tweedsmuir had been ill for some time and his death was not unexpected. He was born John Buchan in Perth, Scotland, on Aug. 26, 1875, the son of Rev. John Buchan and Helen Masterton Buchan. He was an author, publisher, and historian, active in British politics before receiving his appointment to Canada. He had been a popular Governor-General and there was, at the time of his death, a strong movement to have him reappointed at the end of his five-year term. Sir Lyman Duff, Chief Justice of the Supreme Court, was sworn in as Administrator of Canada on the evening of Feb. 11, to serve until the appointment of a new Governor-General.

The Earl of Athlone, uncle of King George and brother of Queen Mary, was named Governor-General on April 3 to succeed Lord Tweedsmuir. The Earl of Athlone had been appointed Governor-General of Canada in May, 1914 to replace the Duke of Connaught. With the outbreak of the war, however, he had entered active service in France and his appointment had been cancelled. Later, on Oct. 27, 1923, he was named Governor-General of South Africa and served with distinction during a difficult period. His term of office was prolonged and he remained at the post for seven years. The Earl was formally installed as Governor-General of Canada in Ottawa on June 21 in a colorful ceremony. His first act was to give royal assent to Canada's newly enacted compulsory military service law.

Legislation.

The session of the new Canadian Parliament which met May 10 proved to be one of the most notable of recent years. In addition to adopting record appropriations for defense, it declared war upon Italy, enacted a conscription bill, and, after years of controversy, adopted an unemployment insurance law.

Although conscription had been an issue in the Quebec elections in the fall of 1939, Government leaders were united at that time in insisting that there was little likelihood of conscription in this war. The defeat of France, however, awakened Canada to the seriousness of the situation, and the Government introduced a full conscription bill into Parliament on June 17. The bill was rushed through Parliament virtually without opposition. The only two opponents were French Liberals who attempted to cripple the bill by amendments. Under the bill as passed, all human and material resources are mobilized for service of the Government. Able-bodied men up to the age of 45 years, except those needed for vital industries, were conscripted for home service. Overseas service continued to be on the basis of voluntary enlistment. Registration of all Canada's manpower was provided, both as a means of preparation for calling men into service and as a protection against fifth-column activities.

An unemployment insurance law had been passed in Canada in 1935, but it had been declared unconstitutional by the Privy Council. Since that time unemployment insurance had been a major issue, but had not again been re-enacted because of fear of violent opposition from the Duplessis-Hepburn provincial governments which were talking vaguely even of secession if the Dominion Government forced such a law upon them. But the defeat of Duplessis in 1939 and the implicit rebuke of the 1940 national elections to Hepburn cleared the way to action by the 1940 Parliament. The three provinces — Quebec, Ontario, and Alberta — which had opposed action, withdrew their objections. So when it came to a vote, the Government's unemployment insurance bill went through without opposition. Nor did the feared constitutional difficulties arise. The House of Commons by unanimous consent adopted a resolution petitioning the King for an amendment to the British North America Act, empowering the Dominion Parliament to enact compulsory unemployment insurance. This formula had been suggested in the report of the Sirois Commission on Dominion-Provincial relations and proved wholly adequate. After years of discussion as to what the British Parliament might do when asked to approve an amendment not universally supported in Canada, it was found that the British Parliament did not look beyond the two Houses of the Canadian Parliament for the voice of Canada. It granted the petition without question. The unemployment insurance bill was adopted by the Canadian Parliament at the end of July.

On June 20, a short time before passage of the resolution asking amendment of the British North America Act, the Government issued an Order in Council granting labor engaged in war work full right to collective bargaining and the right to organize labor unions free from control by employers or agents. Recognition of fair and reasonable wages is also provided, and the undue extension of working hours is frowned upon. The provisions of the Industrial Defense Act were extended to all war work, making it compulsory to call in a board of conciliation in the case of dispute. No new legislation was introduced to support this decree, it being held that the conscription bill, providing for the mobilization of all human and natural resources, gave sufficient authority to the Government to invoke whatever penalties were necessary. A change in the Government's policy with regard to hours was foreshadowed on Nov. 28, when the Labor Minister, Norman McLarty, asserted in the House of Commons that an increase in the working week from forty-four hours to forty-eight and perhaps longer had been made imperative as a result of damage to British industry arising from Nazi air raids.

Appropriations: Rise in Taxation.

Early in the parliamentary session both Houses approved an outlay of $750,000,000 for additional war expenses. This was an increase of $50,000,000 from the Government's original estimate. The budget submitted by Finance Minister J. L. Ralston on June 24 called for an expenditure of $1,148,000,000 for all purposes, of which $700,000,000 was for the war. But as expenditures had risen since these estimates were made, Colonel Ralston said that there would be an additional expenditure of at least $150,000,000 to $200,000,000. Revenue was estimated at $760,000,000, and it was forecast that from $550,000,000 to $600,000,000 would have to be raised by loans. As a yardstick to measure this budget, Colonel Ralston pointed out that Canada's national income in 1939-1940 had been only $3,800,000,000, but was expected to rise to $4,500,000,000 in 1940-1941. Indications at the end of the year were that the 1941-42 budget would be in the neighborhood of $2,000,000,000 out of a national income of $5,500,000,000.

The 1940-41 budget provided for an unprecedented rise in taxation of all kinds. Imports are discouraged by a 10 per cent tax known as the War Exchange Tax, which is added to the duty value of all goods brought into Canada, except under the British preferential tariff. Canadian-made motor cars were made subject to an excise tax and imported cars were made subject to a duty of 10 per cent on values up to $700; of 20 per cent on values from $700 to $900; of 40 per cent from $900 to $1,200; and over 80 per cent on values above $1,200. An additional $1 per thousand was levied on cigarettes, and 10 cents more a pound on tobacco, and a 10 per cent tax was imposed on minor luxuries such as phonographs, cameras, radios, and radio tubes.

A new tax on incomes is also provided. Unmarried persons earning $600 a year and married persons earning $1,200 a year were formerly assessed a 2 per cent tax; single persons earning more than $1,200 were assessed 3 per cent. The tax is deducted at the source. The old income tax exemptions are cut from $2,000 and $1,000 for married and single persons respectively, to $1,500 and $750. The tax rate is now 6 per cent on the first $250 of taxable income; 8 per cent on the next $750; 12 per cent on the next $1,000; and continues to increase with each additional $1,000. A new and more drastic excess profits tax was also adopted. Despite the drastic nature of the new taxes, they met with enthusiastic support from all parties. Members of Parliament cheered each new tax as it was read by Finance Minister Ralston. (See also TAXATION: Taxation in Leading Foreign Nations.)

A second session of Parliament convened on Nov. 7, but it had no major legislation before it. In December, legislation was adopted further regulating imports.

War Effort.

The collapse of France in May and June was followed by a marked speeding up of Canada's war effort. Actual training under the British Commonwealth Air Plan, by which it is ultimately planned to train 25,000 pilots from all parts of the Empire for the Royal Air Force, did not begin until April 29. The first 35 pilot graduates under the plan received their wings on Sept. 13. About the same time, some 300 airmen arrived from Great Britain for training.

The schools constitute the keystone of the program. Three initial training schools are planned for air crews: there are to be twenty-six elementary training schools and sixteen service flying schools for pilots; ten air observer schools, and two air navigation schools for air observers; four wireless schools for air gunners; and ten bombing and gunnery schools for air crew men. Pilots are to be trained twenty-five weeks, and air observers and gunners twenty-six weeks. The scheme is expected to cost about $600,000,000, of which Canada is to contribute $350,000,000.

On Oct. 25, Angus MacDonald, Minister of Defense for Naval Affairs, declared that by 1941 Canada would be training 2,000 airmen a month. He said that in contrast to the 4,500 men under arms in Canada in 1939, there would soon be half a million men in the army, navy, and national militia. In 1939, he pointed out, the personnel of the Navy consisted of 1,774 men, while in 1940 it was approximately 23,000. In contrast to the fifteen ships comprising the Navy in 1939, he estimated that there would be 240 destroyers, armed cruisers, patrol, and assorted harbor vessels in use by the end of 1941. He stressed the fact that Canada was willing and ready to share full responsibility for defending this hemisphere.

On June 21, it was announced that the greatest number of Canadian troops to cross the Atlantic to date had landed safely in England. They included airmen. This was the fourth contingent to land in England and contained part of the Second Division. A third and fourth division of volunteers were in training for possible overseas duty.

The months that followed the defeat of France also brought intensification of economic effort. On June 10, Charles Howe, Minister of Munitions, announced that Canada, in association with the British Government, would begin immediately to build two munitions plants, costing some $20,000,000 in all. One of these was a $12,000,000 plant for the production of nitrocellulose explosives, and the other an $8,000,000 shell-filling plant. It was announced at the same time that Canada had offered its entire automobile industry for the manufacture of war supplies. The heavy taxes subsequently adopted on new automobiles were designed to prevent, as far as possible, the purchase of new cars during the war, thus freeing the bulk of this equipment for war service. It was estimated at the middle of the year that the industry was already geared for the production of 60,000 pieces of mechanized military equipment a year, and could produce nearly 200,000 pieces if all civilian production were halted.

Toward the end of the year, a War-Time Requirements Board was set up to plan 'the most productive and direct use for war purposes of available supplies of material, power, manufacturing plants, and facilities and transportation in order to insure that war needs, in order of their importance, shall have priority over all other needs.' It was stated in November that this Board had as its objective the reaching of maximum productive capacity within eight months. One of the main jobs of the Board is the mobilization of skilled labor for the defense industries. Another is the curtailment of the output of nonessentials in order to free facilities for defense purposes. Shell output had reached a rate of 2,000,000 a month by November. Production of tank and airplane engines depended upon obtaining the necessary machine tools in the United States.

Airplane construction has been slow because of lack of plant facilities; in October 130 planes excepting their engines were being built. By March 1941, it is planned to increase this output to 360 a month, two-thirds of them trainer planes. Altogether nine explosive and chemical plants are under construction, costing $58,400,000. These have been carefully allocated to various sections of the country to avoid concentration in one area. A $40,000,000 aluminum plant is in operation. The mines and smelters of the country are producing at an all-time peak, and the lumber industry has also greatly expanded its output.

In December it was decided that imports of nonessentials into Canada would be drastically curtailed to aid in the war effort. Legislation was introduced by Finance Minister J. L. Ilsley prohibiting the import of 30 main categories of manufactured goods from outside the Empire. A second list of imported articles is to be admitted by special permit. An excise tax of 20 to 25 per cent is to be imposed on these luxury articles manufactured in Canada.

Subversive Activities.

Action against potential espionage or fifth-column activities has been extremely drastic. The Defense of Canada Regulations adopted upon the outset of the war were much more severe than the similar measures taken in Great Britain. Enforcement has been relatively strict, especially against Communists. On May 15, under a judgment delivered in an Ottawa court following the conviction of three men on charges growing out of the distribution of anti-war pamphlets, the Communist Party was declared an illegal organization. Eight members of the National Unity (Fascist) Party, including its leader, Adrien Arcand, were arrested on May 30, and on the same day a Bund gathering was broken up. On June 5, sixteen organizations were formally outlawed. These included the Communist Party (already banned by judicial decree), the Auslands organization of the German National Socialist Party, the German Bund of Canada, and other groups affiliated with foreign countries.

Strong protests were made from time to time by educational and religious leaders against the severity of the Canadian treatment of minority groups but no mitigation in policy seems to have ensued. More than a dozen prosecutions are reported monthly under the Defense Regulations. The campaign for preservation of a greater measure of civil rights in wartime was led by the Toronto Civil Liberties Union and a similar organization in Montreal.

Beginning July 1, much stricter regulations were invoked to cover travel across the United States-Canadian borders.

Dominion-Provincial Relations.

The thorny problems obstructing normal relations between the Dominion Government and those of the various provinces were largely ironed out during 1940. This achievement was in part due to the war which, rather unexpectedly, has eliminated many of the tensions between Ottawa and the provincial authorities. It was also helped by the defeat of the extremist Duplessis regime in Quebec, which for years had led the fight against the extension of Federal authority. The Alberta Premier, William Aberhard, ceased his opposition on the outbreak of the war, leaving only Ontario's Hepburn Government at odds with Ottawa. The success of the Mackenzie King election campaign in Ontario somewhat dampened the effect of this opposition, though it continued throughout the year.

But the most notable contribution toward a solution of the difficulties, which a few years earlier had caused talk of secession, came in the submission in May of the report of the Sirois Commission, more formally known as the Royal Commission of Dominion Provincial Relations. This Commission had been at work for two years on a study of the Canadian financial structure, but its 32-volume report actually contained much more than recommendations on financial matters. It has been called a Canadian Bill of Rights since it provided for equalizing education, public health, and business opportunities throughout the Dominion. This is to be accomplished by a system of Dominion grants-in-aid to raise the level of provincial social services to a common Canadian standard. In order to finance this ambitious program, the Commission also made recommendations for overhauling Canada's tax system so as to equalize burdens in various parts of the country. The most important specific recommendations are as follows: (1) That the Dominion take over the entire debt of each province, or alternatively, 40 per cent of the combined provincial and municipal debts where, as in Quebec, the situation is abnormal. Future borrowings by the provinces would be handled through a central commission and, if approved, would bear the Dominion's guarantee. Interest on provinces' revenue-producing debts would be paid directly into the Dominion Treasury, (2) That the Dominion assume complete responsibility for relief for such unemployed as are employable; that poor relief or care of the unemployables continue to be a provincial or municipal responsibility. Immediate setting up of a system of unemployment insurance by asking the British Parliament to amend the North American Act was recommended. (3) That the present subsidies paid by the Dominion to the provinces be replaced by 'national adjustment grants,' to be renewed every five years. No grant is recommended for the provinces of Ontario, Alberta, or British Columbia, since these provinces have relatively high revenues. (4) That provision be made for emergency grants to meet abnormal conditions, such as the recent drought in Saskatchewan.

To offset the advantages which the provinces receive from this plan, the provinces are asked to surrender certain kinds of taxation to the Dominion Government. The taxes which are to be given exclusively to the Dominion Government are the income tax, inheritance taxes, and taxes on corporations.

These taxes were, of course, considerably increased under the 1940-41 budget.

Reception of the Sirois Commission report was generally favorable, except by Premier Hepburn of Ontario. Hepburn charged that the release of the report was untimely and that it was being used as a 'red herring' to distract public attention from the Government's lack of vigor in conducting the war.

On Nov. 8, Prime Minister Mackenzie King disclosed before Parliament that he had summoned a Dominion-Provincial conference for mid-January, 1941.

United States-Canadian Relations.

The creation of a permanent joint board to coordinate the defenses of the United States and Canada reflected a major development in Canadian-American relations. The development was not wholly unexpected. At least twice in recent years President Roosevelt has publicly stated that the United States would defend Canada in case of attack by a foreign power. It was to implement this policy that the President conferred with Prime Minister Mackenzie King on Aug. 17, on the border near Ogdensburg, New York. The conference was arranged to coincide with the President's presence in that area reviewing troops engaged in peacetime military maneuvers. On the following day, Aug. 18, the two leaders announced agreement on the establishment of a permanent Joint Defense Board. A few days later President Roosevelt named Mayor Fiorello LaGuardia of New York to head the five American representatives on the Board. The others were: Lieutenant General Stanley D. Embrick, U. S. Army, commanding the 4th Corps Area, headquarters Atlanta, Georgia; Captain Harry W. Hill, U. S. Navy War Plans Division, office of the chief of naval operations; Lieutenant Colonel Joseph T. McNarney, Army Air Corps; and John D. Hickerson, Chief of the Division of European Affairs, State Department, who was named secretary of the American section of the Joint Board. The Canadian representatives were headed by O. M. Bigger, K. C. Others were: Brigadier Kenneth Stuart, D.S., M.C., deputy chief of the General Staff; Captain L. W. Murray, R.C.N., deputy chief of Naval Staff; Air Commodore A. A. L. Cuffe of the Royal Canadian Air Force; and Hugh L. Kennleyside, Counselor, Department of External Affairs, who was named secretary of the Canadian section.

The Joint Defense Board lost no time in getting into action. The first meeting was held in Ottawa on Aug. 26, and immediately tackled important strategical problems involved in the common defense of the two countries. On the following day the military and naval representatives of the Board left on an airplane tour of the strategic defense points on the Canadian East Coast. The Board reassembled in Washington on Sept. 9 and in Boston on Oct. 2 to continue its discussions. Later it journeyed to Vancouver to consider the problems of joint defense of the Pacific.

One of the immediate developments from the discussion was the transfer to Canada of a considerable amount of excess American military supplies. Several hundred World War tanks were turned over to Canada for training purposes. Other military supplies, including some thousands of old Lee-Enfield rifles, have been released from time to time. Canada also received six of the fifty over-age United States destroyers obtained from the United States in the British-American deal involving the lease of Atlantic bases in exchange for destroyers. While Canada was not directly involved in this deal — since none of the bases are in Canadian territory — that country was doubtless consulted frequently during the negotiations inasmuch as it had already made extensive commitments for the defense of Newfoundland and use of that island's bases.

Following up the earlier discussions between Prime Minister Mackenzie King and President Roosevelt, the Earl of Athione, Canada's new Governor-General, accompanied by his family, paid a courtesy visit to the President's home at Hyde Park on the weekend of Oct. 20. If anything of political significance came out of the two-day visit, it was kept secret as no formal statements were issued at its close.

The newly appointed Minister to Canada, James H. R. Cromwell, reached his post at Ottawa on Jan. 23, 1940. He resigned on May 22 to run for the United States Senate from New Jersey. His resignation was promptly accepted by President Roosevelt. During his brief time in office, Mr. Cromwell was widely criticized in the United States for an intemperately pro-Ally speech. On May 27, the President appointed Jay Pierrepont Moffat, chief of the European Division of the State Department, to replace Mr. Cromwell as Minister to Canada. The appointment of as able and experienced a diplomat as Mr. Moffat to the post was received with satisfaction in Ottawa.

Early in October the President named J. Warren Madden, chairman of the National Labor Relations Board, to study labor problems in connection with defense production in Canada.

Negotiations over the St. Lawrence Seaway Project were resumed in October, and general agreement was understood to be reached, though no details were announced at the time. An agreement was announced on Oct. 14, however, under which the Ontario hydroelectric system will obtain more water from the Niagara River. The arrangement provided that waters from the Albany River basin which ordinarily flow into Hudson Bay should be diverted into the Great Lakes system. Prime Minister King told the press that preliminary engineering and other investigations had begun on the St. Lawrence Seaway Project in order that construction could be started without loss of time when the final decision was reached by the two governments. Later, on Dec. 5, President Roosevelt announced that he would submit a Seaway treaty to the Senate when it reconvenes in January, 1941.

A general agreement regarding air travel between the United States and Canada was reached on Sept. 24 between the representatives of the Civil Aeronautics Authority of the United States and the Canadian Department of Transport. Non-stop flights between American and Canadian cities were provided under the new arrangement which was described as another major move to strengthen relations between the two countries.

Economic and Financial.

Farm, mining, and industrial production was at an extremely high level throughout 1940.

The wheat crop was estimated officially at 561,104,000 bushels as compared with the excellent crop of 489,623,000 bushels in 1939. With the large carryover from the previous year, the supply for the marketing year starting Aug. 1 was estimated at 834,101,000 bushels, the largest in the Dominion's history. Exports for the year, mostly to Great Britain, were 208,000,000 bushels. Canada was not only able to meet British demands for bacon and poultry products, but had a small surplus which was later absorbed by special arrangement. The tobacco crop was cut in half as a result of reduced acreage and early autumn frosts. The 1940 production amounted to only 46,000,000 pounds, compared with the record crop of 108,000,000 pounds in 1939. Despite the small crop, the carryover in Canada on Oct. 1 was at the record-breaking high level of 111,000,000 pounds. Exports for the marketing year amounted to only 12,000,000 pounds.

The physical volume of business activity during the first nine months of 1940 was nearly 20 per cent higher than in the corresponding period of 1939, according to the official estimates of the Dominion Bureau of Statistics. The index of manufacturing production rose from 112 to 141, an increase of 26 per cent. The most spectacular gain was made by the iron and steel industry. Steel ingot production increased from 937,000 to 1,465,000 long tons. Automobile production, including trucks for military purposes, rose from 110,000 to 155,000 units. Construction contracts awarded during the nine-month period were 57 per cent higher than last year. Newsprint production rose from 2,058,899 to 2,573,605 tons during the nine-month period, a gain of 25 per cent. The shipment of planks and boards increased from 1,579,885,000 to 1,788,363,000 feet.

The index of commodity prices for the 1940 period was 82.6 as compared with 73.8 in the first nine months of 1939. The cost of living rose 4.6 per cent during the first year of the war.

Employment was at the highest level for the twenty years for which records have been kept. Some shortage of skilled labor appeared in the war industries.

Exports ran far above the 1939 figures throughout the year. For the first quarter of 1940 they were valued at $243,898,000, or 24 per cent over 1939. In May they reached $109,000,000, the highest for any month since 1929. Imports were also much higher, owing to the need for war supplies and raw materials for the war industries.

On Nov. 6, the Dominion Bureau of Statistics stated that revenue on Canada's steam railways during the whole year 1939 amounted to $367,179,895 as against $336,833,400 in 1938.

It was announced on Feb. 6, 1940 that the total deficit of the previous fiscal year ending March 31, 1939, had been $50,891,744, or about $5,000,000 less than estimated by Finance Minister Dunning on April 25, 1939. Expenditures for the year were $553,063,098 and receipts and credits totaled $502,171,353. The net debt of the Dominion at the end of the fiscal year was $3,152,559,314. Expenditures for war purposes in the fiscal year ending March 31, 1940, amounted to $131,000,000. The deficit for the fiscal year was $118,000,000.

Revenues for the eight months ending Nov. 30, 1940, totaled $506,880,000 — an increase of $152,167,000 over the corresponding period of 1939. Expenditures for the period totaled $685,325,000, of which $392,787,000 was for war purposes. The eight-month deficit was $178,445,000.

A $200,000,000 war loan was floated without difficulty in January, 1940. It was supplemented by a system of war savings certificates for small borrowers which yielded $2,500,000 a month, and which Finance Minister Ilsley hopes will soon yield $10,000,000 a month. The second war loan, a $300,000,000 issue, was floated in September and was oversubscribed. The total public borrowing for the year up to late November amounted to $524,000,000. Mr. Ilsley gave notice on Nov. 21 that the next large war loan would be floated in the summer of 1941. (See also WORLD ECONOMICS: Canada.)